FINANCIAL MANAGEMENT

PRESENTATION
FINANCE

The management of large amount of money, especially by government and large companies.
Finance is a term for matters regarding the management, creation, study of money and
investment.
It involves use of credit/debit, securities, investment in various projects to get return.
It is divided into 3 category:
Public Finance
Corporate Finance
Personal Finance
 FINANCE MANAGEMENT
Financial management is the process of planning, organising, controlling and
monitoring financial resources in order to achieve the objective of an
organisation.
It involves management of financial resources such as cash, credit and
investment in order to optimize financial performance and maximize
shareholder value.
DEFINITION

• “ Financial management is the activity concerned with planning, raising, controlling

and administering of funds used in business”~ Guthman and Dougal
• “Financial management is that area of business management devoted to a judicious
use of capital and a careful selection of the source of capital in order to enable a
spending unit to move in the direction of reaching the goals.” – J.F. Brandley
• “Financial management is the operational activity of a business that is responsible
for obtaining and effectively utilizing the funds necessary for efficient
operations.”- Massie
FINANCIAL MANAGEMENT CYCLE
NATURE OF FINANCIAL MANAGEMENT

• Dynamic : Financial management in constantly changing , as new financial product and services are developed,
financial market changes, as new regulations are introduced.
• Comprehensive : Financial management involves the management of all financial resources of an organization,
including cash, investments, credit, and liabilities. It also involves financial planning, budgeting, forecasting,
financial analysis, investment management, risk management, and financial reporting.
• Objective oriented : Financial management is focused on achieving the objectives of an organization, such as
maximizing shareholder value.
• Long term : Financial management is concerned with the long-term financial health of an organization.

• Interdisciplinary: Financial management draws upon concepts from a variety of disciplines, such as
accounting, economics, mathematics, and statistics, to analyze financial data and make informed decisions.
FUNCTIONS OF FINANCIAL MANAGEMENT
SCOPE OF FINANCIAL MANAGEMENT
FINANCIAL DECISION

Managers also make decisions on obtaining funding from both long-term (referred to
as Capital Structure) and short-term (referred to as Working Capital) sources.
They are two type:
•Financial Planning decisions Financial planning is the process of estimating the
sources and application of funds to ensure that funds are available when needed.
•Capital Structure decisions Raising funds involves choosing external and internal
sources, such as issuing shares, bonds, borrowing, and retained earnings.
INVESTMENT DECISION

Managers need to decide on the amount of investment available out of the existing
finance, on a long-term and short-term basis.
They are of two types:
•Long-term investment decisions or Capital Budgeting mean committing funds for
a long period of time like fixed assets. Investing in fixed assets is an irreversible
decision that determines the financial pursuits and performance of a business.
•Short-term investment decisions or Working Capital Management means
committing funds for a short period of time like current assets. Investment decisions
directly affect the liquidity and performance of a business.
DIVIDEND DECISION
These decisions concern how much of the profits will be paid as dividends. A greater dividend is always
requested by shareholders, but management prefers to keep profits on hand for operational purposes.
Consequently, this is a difficult managerial choice.
OBECTIVE OF FINANCIAL MANAGEMNT

The primary objectives of financial management are:

•Attempting to reduce the cost of finance

•Ensuring sufficient availability of funds
•Also, dealing with the planning, organizing, and controlling of financial activities like the procurement
and utilization of funds.